Posted by Nydia Streets of Streets Law in Florida Divorce
Loans from family members to one spouse or both may be a common occurrence. How are these loans treated in equitable distribution during a Florida divorce? This was an issue in the case McHugh v. McHugh, 5D2023-3130 (Fla. 5th DCA December 6, 2024).
In this divorce case, the parties separated after the former wife moved from the parties’ residence in Virginia to Florida. During the parties’ separation, but before a petition for divorce was filed, the former wife established a bank account in her name and deposited money into that account. By the time a petition was filed, she had over $10,000 in the account. During the parties’ marriage, the former husband’s father loaned money to him which the former husband used to pay expenses of the marital household. There were no formal loan documents executed between them, no interest was being charged, and the former husband testified he was repaying it gradually as money became available to him. The former husband’s father testified he expected to be repaid, and money transfer documents accepted into evidence indicating notes made by the former husband’s father at the time of the transfer to the former husband that these were loans. The trial court entered a final judgment which classified the former wife’s aforementioned bank account as non-marital and classified the money given by the former husband’s father as gifts. The former husband appealed.
First discussing the former wife’s bank account, the appellate court noted Fla. Stat. 61.075 provides
All assets acquired and liabilities incurred by either spouse subsequent to the date of the marriage and not specifically established as nonmarital assets or liabilities are presumed to be marital assets and liabilities. Such presumption is overcome by a showing that the assets and liabilities are nonmarital assets and liabilities.
The cut-off date for determining assets and liabilities to be identified or classified as marital assets and liabilities is the earliest of the date the parties enter into a valid separation agreement, such other date as may be expressly established by such agreement, or the date of the filing of a petition for dissolution of marriage.
The court reasoned “The undisputed evidence below showed that the funds in the Bank of America account were obtained after the parties separated but before the petition for dissolution was filed. As there was no separation agreement in this case, under section 61.075(7), the cut-off date for asset classification is the date on which the petition for dissolution of marriage was filed. [. . .] The trial court concluded that the funds were nonmarital on the basis of equity and to avoid fundamental unfairness. This was error as the trial court chose a date of asset classification not provided for in section 61.075(7), Florida Statutes.” On this issue, the court reversed, concluding “There was no testimony to rebut that statutory presumption and the trial court erred in shifting the burden of proof to Former Husband by noting that he had not presented any evidence to support that it should be classified as a marital asset. Accordingly, we hold that Former Wife’s Bank of America account is a marital asset subject to equitable distribution and reverse the trial court’s improper classification of it as a nonmarital asset.”
Turning to the issue of the money given to the former husband by his father during the marriage, the appellate court noted “Generally, a gift is presumed where the following three elements are satisfied: donative intent, delivery of possession, and surrender of dominion and control.” Applying this standard to this case, the court concluded “In Bratsch v. Bratsch, 373 So. 3d 390 (Fla. 5th DCA 2023), this Court reversed the trial court’s finding that the money that the former wife received from her parents was a gift and not a loan. Id. at 391. At trial, there was record evidence that the former wife agreed to pay back the borrowed funds, payments had been made, and further, no evidence was offered by the former husband to contradict that the funds were a loan. Id. As in our case, in Bratsch, there were no written loan documents or written agreements to repay the money. In both Bratsch and our case, the lending parent and borrowing child/spouse testified that the transactions were loans, not gifts. Id. at 390. As in Bratsch, the opposing spouse, here Former Wife, offered no contradictory evidence. Id. Accordingly, the trial court’s finding that the money provided by Former Husband’s father was a gift is not supported by competent substantial evidence and is therefore reversed. On remand, the trial court shall treat the outstanding balance of that loan as a marital liability which is to be equitably distributed.”
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